FOMC Press Conference Notes

“Today, the Federal Open Market Committee (FOMC) decided to raise the target range for the federal funds rate by 1/4 percentage point, bringing it to 1-1/4 to 1-1/2 percent. Our decision reflects our assessment that a gradual removal of monetary policy accommodation will sustain a strong labor market while fostering a return of inflation to 2 percent, consistent with the maximum employment and price stability objectives assigned to us by law”

Expect the labor market to remain strong

“You may have noticed that we altered the statement language about the labor market outlook. This change highlights that the Committee expects the labor market to remain strong, with sustained job creation, ample opportunities for workers, and rising wages. ”

Inflation measures remained below 2%

“Even with a firming of economic growth and a stronger labor market, inflation has continued to run below the FOMC’s 2 percent longer-run objective. The 12-month change in the price index for personal consumption expenditures was 1.6 percent in October, up a bit from the summer but still below rates seen earlier in the year. Core inflation–which excludes the volatile food and energy categories–has followed a similar pattern and was 1.4 percent in October.

Yellen out

“Finally, I’d like to note that, although I have one more FOMC meeting to attend in the New Year, this will be my last scheduled news conference. Over the next month and a half, I will do my utmost to ensure a smooth transition to my designated successor, Jay Powell. I am confident that he is as deeply committed as I have been to the Federal Reserve’s vital public mission. Thank you for being such an attentive audience these past four years.”

Of course the stock market has gone up a lot this year

“I mean of course the stock market has gone up a great deal this year, and we have in recent months characterized the general level of asset valuations as elevated. What that reflects is simply the assessment that looking at price earnings, ratios, and comparable metrics for other assets other than equities, we see ratios that are in the high end of historical ranges. And so that’s worth pointing out. But economists are not great at knowing what appropriate valuations are. We don’t have a terrific record, and the fact that those valuations are high doesn’t mean that they are necessarily overvalued. We are in a, I’ve mentioned this in my opening statement, and we’ve talked about this repeatedly, likely, a low interest rate environment lower than we’ve had in past decades, and if that turns out to be the case, that’s a factor that supports higher valuations. We’re enjoying solid economic growth with low inflation, and the risks in the global economy look more balanced than they have in many years. I think what we need to and are trying to think through is if there were an adjustment in asset valuations with the stock market, what impact would that have on the economy and would it provoke financial stability concerns. And I think when we look at other indicators of financial stability risks, there’s nothing flashing red there or possibly even orange.”

There’s a lot less to lose sleep over

” look, at the moment the U.S. economy is performing well. The growth that we’re seeing, it’s not based on, for example, an unsustainable, build-up of debt as we had in the run-up to the financial crisis. The global economy is doing well. We’re in a synchronized expansion. This is the first time in many years that we’ve seen this. Inflation around the world is generally low. So I think the risks are balanced, and there’s less to lose sleep about now than has been true for quite some time, so I feel good about the economic outlook. “